Types of retirement portfolios

The obvious goal of a retirement plan is to save and grow money that you’ll later withdraw as retirement income. But the investment needs of your retirement plan will likely change over time.


Jump to learn more about these types of retirement portfolios:

Growth portfolio | Balanced portfolio | Income portfolio


Early in your career, you’re probably looking to accumulate as high a balance as possible. We’d call that a growth portfolio. As you mature in your career, you might grow weary of relying too heavily on stocks, but still want to retain a moderate amount of growth through a balanced portfolio. Later on, you might be after the long-term sustainability that an income portfolio can afford.

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    Good news! Americans are living longer than ever before. But with today’s longer lives AND longer retirements the nest egg is not all it’s cracked up to be.

    You might be shocked to hear that a $500,000 nest egg could only generate an estimated $27,000 in income each year in retirement.

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Growth portfolio

A growth portfolio aims to increase the value of your retirement savings. As such, it generally favors stocks, which – though potentially volatile – have historically delivered higher returns than bonds over long periods of time.

If you’re looking to build a growth portfolio, consider the following strategies:

  1. Broaden your diversification. Considering a wider range of investments, such as alternatives, helps to reduce risk and exposes you to more opportunities for growth. Unlike stocks, bonds or cash, alternative investments don’t fall into the “traditional investments” category. And they behave differently, too. In a year when stocks are doing poorly, an alternative investment might be having a great year. We call that “negative correlation.”

    Thus, the idea behind an alternative investment strategy is that, because alternatives and traditional investments are negatively correlated, adding them to your investment mix provides greater diversification. In other words, adding an alternative investment strategy to your retirement plan can help decrease the risk that your savings could be overly negatively impacted just because one of the underlying assets doesn’t perform.

  2. Seek to reduce risk. You don’t necessarily need to move away from stocks in order to help reduce risk. You could, for example, look to dividend-paying stocks or other growth strategies that are designed to offset volatility to help manage risk, while still being positioned to capture a portion of the market’s upside.

Balanced portfolio

A balanced approach, as you might expect, steers clear of extremes. It typically focuses on seeking moderate levels of return and risk by investing in a fairly even split between stocks and bonds, and then dialing up and/or diversifying one or the other depending on market conditions, risk tolerance or other factors.

Here are two things to keep in mind when building a balanced portfolio:

  1. Evaluate the risk-versus-reward tradeoff. For example, while high yield bonds have more growth potential than investment grade bonds, they may also be more volatile. As you think about the balance of investments, be sure to account for their true underlying risks.
  2. Investigate an all-in-one solution. Rather than build your own portfolio, you could invest in an all-in-one fund that seeks to balance your retirement investments for you, like a target date fund. Asset allocation and multi-asset funds also aim to provide an optimal balance of risk and return.

Income portfolio

An income portfolio is designed to offer long-term sustainability through a generally conservative strategy of bonds, mortgage-backed securities, stocks and other investments that pay interest or dividends. The goal is to generate an income stream that can compound and increase the value of your investment. It also seeks to provide protection that often appeals to pre-retirees.

Here are some tips for diversifying your investments to help balance a conservative approach with a desire for income:

  1. Explore a wider range of bond options. U.S. Treasuries are still the foundation of many income portfolios, but the search for higher yields has many investors mixing in lower credit quality, mortgage-backed, corporate and global bonds.
  2. Don’t automatically discount stocks. An equity income fund might suit your needs. These funds seek to invest in stocks with a track record of paying out high or increasing dividends.
  3. Consider REITs. Real estate investment trusts (REITs) can be an efficient way to invest in a broad range of real estate holdings that pass through commercial rents.

Regardless of which portfolio strategy best suits your current investments needs, it’s important to check your asset allocation at least once a year to ensure you stay on track to meet your retirement income goals.